The IGO Ltd (ASX: IGO) share price crashed this morning even as the miner forecasted a big uplift in revenue and earnings.
The nickel miner's (formerly known as Independence Group) share price tumbled 9% to $5.03. This makes it the worst performer on the S&P/ASX 200 Index (Index:^AXJO) at the time of writing.
The slump is nearly twice that of the second worst performer, the GUD Holdings Limited (ASX: GUD) share price which tanked 4.9% to $11.16.
In case you are wondering, in third spot is the NRW Holdings Limited (ASX: NWH) share price with its 3.6% loss to $1.72.
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Big uplift in revenue
But it's IGO that's worse for wear as its full year forecasts fell short of market expectations. Management said that FY20 revenue would hit $892.4 million after fourth quarter sales jumped 23% quarter on quarter (QoQ) to $230.6 million.
The full year figure is nearly $100 million ahead of what it posted last year and is the pleasing part of the update, in my view.
The problem is that IGO is forecasting full year underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of $459.6 million.
High earnings bar
While that's around 35% ahead of the previous year's result, it falls short of analysts' expectations.
For instance, Macquarie Group Ltd (ASX: MQG) was expecting management to post an operational EBIDTA of $530 million.
Investors may have also been put off by IGO's FY21 production guidance as the miner is expecting to produce less of its key commodities.
Falling production in FY21
IGO is guiding to produce between 27,000 to 29,000 tonnes of nickel in concentrate at its flagship Nova mine this financial year. This compares to the 30,436 tonnes it produced in FY20.
The amount of copper it's hoping to mine is also lower for FY21 at 11,000 to 12,500 tonnes when it recorded 13,772 tonnes last financial year.
Its Nova project was a real star performer in the June quarter as it delivered ahead of expectations. This perhaps created an expectation that it will keep surprising on the upside. Shareholders will be hoping management is just being conservative.
Is IGO share price a buy?
Forecasted gold production at IGO's Tropicana JV mine will also fall short of FY20. The mine produced 463,100 ounces of the precious metal in total but this is expected to fall to 380,000 to 430,000 ounces in FY21. So much for capitalising on the record high gold price.
But I suspect IGO will soon draw in bargain hunters if its shares fall much further. The outlook for nickel is bright thanks to the growth in electrified vehicles and the miner holds a strong balance sheet.
